I think many folks are aware of how certain wealthy neighborhoods use zoning to keep out the lower-income people they don't want around (e.g. minimum lot sizes, minimum home sizes, petty harassment over home and lawn maintenance, etc.) If you think of California as one big rich neighborhood, many of their labor and housing laws have this same effect of keeping lower income people out.

Every year from 2000 through 2015, more people left California than moved in from other states. This migration was not spread evenly across all income groups, a Sacramento Bee review of U.S. Census Bureau data found. The people leaving tend to be relatively poor, and many lack college degrees. Move higher up the income spectrum, and slightly more people are coming than going.

About 2.5 million people living close to the official poverty line left California for other states from 2005 through 2015, while 1.7 million people at that income level moved in from other states – for a net loss of 800,000.

...
The leading destination for those leaving California is Texas, with about 293,000 economically disadvantaged residents leaving and about 137,000 coming for a net loss of 156,000 from 2005 through 2015. Next up are states surrounding California; in order, Arizona, Nevada and Oregon.

Wow, I am totally lost. The minimum wage currently in California is $10.50 an hour, going up to $15 over the next 5 years. The minimum wage in Texas is the Federal minimum at $7.25. If I understand it right from progressives, minimum wages are a windfall for workers that raise wages without any reduction in employment. So why are the very people California claims it is trying to help leaving the state in droves? For unenlightened Texas, of all places.

Of course the reason is that minimum wages do indeed have employment effects.If you think of California as one big rich neighborhood, minimum wages act as a zoning plan to keep the "unwashed" out. Setting a minimum wage of $15 is equivalent to saying, "if your skills and education and experience are low enough that your labor is not yet worth $15 an hour or more, stay out."

Of course, there are a lot more problems for jobs in California than just minimum wages. At every turn, California works to make operating a business difficult and hiring unskilled workers more expensive. And then there is the cost side. With its building restrictions and environmental rules, most California cities have artificially inflated housing costs, just another way to tell lower income people to keep out.

Well-paid new arrivals in California enjoy a life that is far out of reach of much of the state’s population. Besides Hawaii and New York, California has the highest cost of living in America.

During the past three years in Sacramento, median rent for a one-bedroom apartment has risen from about $935 a month to $1,230 a month, according to real estate tracking firm Zillow.com. A single mother working 40 hours a week at $15 an hour would spend nearly half of her gross income to afford an apartment at that price. She would pay about 10 percent less for a one-bedroom rental in Houston or Dallas.

Sacramento remains relatively affordable compared to other California markets. Median rent for a one-bedroom apartment in Los Angeles is about $2,270 a month. In San Francisco, $3,700. Without subsidies, those prices are unreachable for a single parent making $15 an hour.

28 Comments

ErikTheRed:

ARGH! Such a great analysis ending on completely the wrong note despite the rest of the piece teeing up the right one. We do not have a problem with job creation, and continuing to frame the debate in this manner plays directly into the hands of the progressives and other statists (stormtrumpers & neocons) who want government to be the source of jobs.

There are no problems with job creation. We have a mountain of problems with job destruction. The cost of employing someone is equal to wages + internal company overhead (management, facilities space, equipment, software licensing, etc.) + benefits + external regulatory overhead (safety, HR, etc). When the government increases wages, benefits, and other overheads beyond what a business can reasonably sustain in this country, jobs get destroyed. Some of them pop back up overseas (which the statists like to jump up and down like monkeys on crack and point at), and some don't. Doing business internationally is far more difficult than keeping things domestic. Aside from products and services that are culturally or stylistically attached to certain geographies, very few people outsource internationally for the fun of it. It's difficult and expensive.

There's also the whole other issue of chasing inflation with wages rather than letting natural deflation occur - which would be better for just about everyone outside of Washington and Wall Street, but that's a mess for another day.

Jaedo Drax:

Dallas CPA:

A few years ago, I was hiring for an entry level position in Dallas paying $40k. I received numerous resumes from CA from individuals with 1-3 years experience earning $53k-58k in CA. Everyone of those individuals recognized making $40k in dallas was effectively a pay raise.

Fred_Z:

I have read the 'creating more jobs is wonderful' meme thousands of times.

However, a miserable man named Tim Worstall has repeatedly pointed out to me some economic fundamentals such as "jobs are a cost, not a benefit" of any economic scheme. The goal is to create wealth, not to create jobs. http://www.timworstall.com/

Dave Boz:

"if your skills and education and experience are low enough that your labor is not yet worth $15 an hour or more, stay out."

Well yes. This is pretty much the Progressive position. I've heard people say it explicitly - if you're not worth $15 an hour, you should be on welfare. What they're also saying (not explicitly) is that if you're poor, you should remain poor with no chance of escaping poverty.

SamWah:

Thomas B:

Getting poor people to leave your area is a fairly common gentrification goal. California's public policies, by accident or design, are turning it into a giant gated community. The elites who live there are having their cake and eating it too: they get ever fewer poor and lower-income people (who contribute to urban sprawl, road congestion, demands for public services the elite doesn't value, local pollution) while getting to tell themselves that they're good people who are taking action to help the poor (by raising the minimum wage, employment protections, renter protections, etc.).

Q46:

Not quite. Economic activity is not done to create jobs, but so we have more things to consume. If machines could do everything and there be no jobs, it would mean we were all very rich.

The key to tackling poverty is economic liberty, that is free market capitalism, contract and property rights, from which new things for us to have can be produced making us wealthier, the by-product being a requirement for labour to produce these things. It is from this that jobs are created.

It is an important point, because that is precisely how politicians think and then 'create jobs' by expanding bureaucracies, publicly funded infrastructure projects, regulation, import tariff and non-tariff barriers, etc.

morganovich:

back in 1981, the US had new firm formation of about 14.3 million a year.

it had firms going out of business at 8.5. that netted 5.8 million firms a year.

by 2000, we had about the same number going out of business, but the number created dropped to about 10.2 million.

from 2008-11, the rate of firm death exceeded that of firm creation. we were actually losing companies for the first time since ww2.

in 2013 (the last year for which i have data here) net firm creation was about zero.

but the death rate has been remarkably constant. in 2013 at 8 million, it was actually slightly down from 1981 and well below trend for the last 30 years (8.5-9 is typical).

the issue is not that the rate of job destruction has risen, it's that company formation dropped from 14.3 to 8. that's 44% in actual numbers despite massive population growth of 37% since 1981.

that is a horrifying decline. it's simply become too hard to start a business.

add to this mosaic that real gross private domestic investment in the US has fallen off a cliff, and i think we start to see strong evidence that the issue here is jobs not being created despite a growing population, not jobs being destroyed.

aggregate US RGPDI for the first 6 years of the 10's is up 7.85% vs the first 6 years of the 00's.

this contrasts to typical decadal growth in the 30's and 40's.

39% in the 80's
55% in the 90's
37% in the 00's

and 7.9% now.

this is unprecedented in US history at least back to the great depression.

this is why productivity numbers are so awful even with such low corp formation.

we do have a huge problem with job creation, company formation, and capital investment.

that problem is government.

people, left to their own devices, are excellent at doing all those things. but hamstrung by regulation, taxation, market interference, they simply cannot function.

Aajaxx:

CC:

Another thing that California has been doing (if my news sources are correct), particularly around the fringes of LA, is bothering rural folks who have messy yards, weird houses (like self-built), old houses not up to code, trailer homes, tree-houses, etc. These people are not bothering anyone except the inflated self-image of the rich busy-bodies.

Zekester7659:

Fred_PA_2000:

You have a good point. But it says prosperity will flow to those who own the machines. If we don't want extreme wealth polarization, we must somehow insure that "average" people own an "average" slice of the pool of machinery.

John O.:

I remember several years ago a Reason magazine article and video on YouTube on a guy living in rural Los Angeles County (you know the part of LA county that is north of the San Gabriel Mountains) near Lancaster who was being cited by the county government for code violations left and right for nonsense. He had few neighbors because his property was so large but the code enforcement claimed that it was the neighbors complaining, it was pretty clear to me that the real reason was to likely bankrupt the guy and force him to sell his property so that a government official could get a nice windfall from some sort of under the table deal from some development that would have replaced his house.

John O.:

Actually no, regulating commerce has nothing to do with levying tariffs (that's the first clause in Section 8), but Article 1 Section 10 Clause 2 DOES address the issue of a state laying import and export tariffs and only permits that to states subject to the consent of Congress which can overrule a state.

Article I, Section 10, Clause 2:
No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws; and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul [sic] of the Congress.

This makes doing so practically unfeasible because the clause was included to keep the states from waging "economic war" against one another and destabilizing the national economy.

Aajaxx:

markm:

That can happen, but usually the only reason a local government is harassing residents is that the politicians and bureaucrats get their jollies by sticking their noses into other people's business and wielding arbitrary power. This can actually be at it's worst in a small town; the power-mad were often the only ones who were willing to run for the office.